At the occasion of the
2017 Standards Forum to be held at Sibos in Toronto, Canada from 16 to 19 October, I interviewed a number of SWIFT standards experts about the content of this year's programme. During the weeks leading up to Sibos, my posts will offer readers a preview
of what people can expect to hear about in Toronto.
In the last of our pre-Sibos Standards Forum interviews, I talked to Stephen Lindsay, Head of Standards, and
Paul Janssens, Programme Director, to learn what has been happening in the area of security and compliance since last Sibos. If you will be attending Sibos, kindly refer to the Standards Forum programme to learn more about this or any other
topics. And if you aren't going to be in Toronto, I refer you to
www.sibos.com and various social media. Thank you for your interest!
Paul Miserez: Stephen, the industry is facing a multitude of challenges related to financial crime, terrorism, money laundering, etc. Can you explain our readers how standards, market practice and technology can assist the industry in meeting
Stephen Lindsay: Standards and market practice are key tools in the effort to combat financial crime and other challenges. They allow the industry to formulate clear guidance for users to follow in order to comply with regulation, where
the regulations themselves focus more on principles and high-level requirements than implementation details.
As the challenges facing banks evolve, so do the standards. For example, good quality and well defined party data is vital to ensure that payments can be screened efficiently and effectively. This will ensure a minimum of the 'false positive' compliance
hits that generate manual work for banks and dissatisfaction for customers. To assist with this, the
Payments Market Practice Group (PMPG) recently published a great guide called
'Structured ordering and beneficiary customer data in payments'. It explains the proper use of the structured field options. They are available for use now and will become mandatory as part
of the SWIFT Standards Release 2020. At the same time, SWIFT published an Information Paper covering the same topics, called 'Overcoming data quality challenges in payments'.
Then there is
technology, which can also help compliance teams to analyse the payments that they send and receive, to address data quality issues in their own operations and raise concerns with their counterparties. This and all other aspects I mentioned will of course
be covered in detail at the Standards Forum!
Paul M.: Paul, how important are standards to implement new regulations and reporting requirements? Are regulators talking to each other, to market authorities, to standards setters?
Paul Janssens: In Europe, regulators are adopting international standards for regulatory reporting. Several examples come to mind: The
MiFID 2 directive and MiFIR regulation is one of them. In less than a hundred days, Financial Institutions will report transactions to their competent authority using ISO 20022 messages and several ISO data standards. They will use LEI for entity identification,
ISIN for instrument identification, MIC for market infrastructure Identification, etc.
Another good example illustrating the power of standards and the fact that regulators are talking to each other is the collaboration between the European Central Bank (ECB), national Central Banks and the Bank of England for money market transactions reporting
using ISO 20022 messages for transactions in EUR (MMSR) and in GBP (Sonia). Several other projects are in implementation or under development.
Paul M.: Are these regulators convinced about the benefits that global standards can bring to the process?
Paul J.: Regulators are implementers just like any other industry player. So yes, they are convinced about the importance of standards to collect useful and high quality data from these other players. When new rules or new requirements are
to be implemented, using widely adopted standards makes it easier, faster and cheaper. On the other hand, when legacy systems or reporting messages are already in place, replacing these with standards is a business case that is more difficult to justify.
Paul M.: Compared to last year, what initiatives have come up and what is their impact for implementers of regulatory requirements?
Paul J.: What we are seeing is that important International regulatory bodies, such as the
Financial Stability Board (FSB), the
Committee on Payments and Market Infrastructures (CPMI) or the
International Organisation of Securities Commissions (IOSCO) are proposing or recommending the adoption of global standards. At the same time, they are engaging industry players to participate in setting rules and define principles. For example, CPMI recommends
usage of the LEI standard to address Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) challenges in its report on correspondent banking. IOSCO is defining standard data elements for derivatives transactions based on existing standards.
They do this to improve transparency, mitigate systemic risk and prevent market abuse. Standardising data elements enables the aggregation of data reported by the actors in the derivatives market.
Please also read the other 2017 Sibos Standards Forum interviews:
Highlights and approach of the 2017 Sibos Standards Forum
ISO 20022 as innovation enabler
New technologies and business standards
4. Transformations in the payments and securities business